Today (March 31) is the last trading day of the first quarter. How badly has gold performed so far this year? A set of data seems to serve as a comparison.
In the first three months of this year, gold has fallen by nearly 12%. Throughout history, the last time gold had a worse start to the year was in 1982. Gold tumbled 20% in just three months.
The sharp fall in gold in the first quarter also means that the longest consecutive quarterly rise in gold prices since the global financial crisis will come to an abrupt end. Gold prices rose for nine consecutive quarters from the fourth quarter of 2018 to the end of last year, but now the bull market seems destined to come to an end.
People in the industry have different opinions on the reasons for the decline of gold during the year. The prevailing view is that a stronger dollar, higher bond yields and hopes of a faster recovery in the US economy have dampened demand for safe-haven gold. ETF has cut its gold position in four of the past five months after hitting a record high last year as the novel coronavirus epidemic spurred demand for safe-haven assets.
However, the latest perspective of McGraw (Mike McGlone), a senior commodities strategist at, Bloomberg Intelligence, this week seems to be quite unique. He believes that Bitcoin may be the main culprit for gold's malaise.
"compared with young Bitcoins, old-fashioned gold seems listless," McGuron said. The gold bull market has clearly stalled and we believe it is transitioning to a more long-term, difficult, range-fluctuating phase. Unless Bitcoin's upward search for new highs is reversed, the cryptocurrency will become the biggest resistance to gold. "
McGuron points out that for many investors, Bitcoin is replacing the role of gold in the portfolio, and before that changes, gold will have to be diverted by Bitcoin. "unless something unexpected hinders the flow of money to Bitcoin, I think the upside for gold will be limited. Precious metals have lost their main support-inflows from the exchange-traded fund (ETF). "
Mr McGuron expects gold's trading range to remain between $1600 and $1900 an ounce, adding that there is not much room for gold to rise or fall. Even if the gold bull market is temporarily dormant, a bear market is unlikely.
McGuron believes gold seems oversold at its current level of less than $1700 an ounce and could easily bounce back above this critical level.
"the gold market is a little too cold in March and is more likely to rebound, but we expect gold prices to enter a long dormant period," Mr McGellon said. The upside of gold will be limited by strong resistance and relatively more novel bitcoin. Support should be found below $1700 an ounce, and the relative value will be highlighted. After all, gold prices have fallen about 20 per cent from their peak in August last year. The bottom range of about $1650 is good support, while the 50-week moving average of about $1830 is the initial resistance. "
